Capital Gains and Cost Allocation: Tax Challenges in Indian Demergers
Keywords:
Demerger, SEBI, Corporate Restructuring, Ownership Structure, Compliance, Market DynamicsAbstract
A demerger is a corporate restructuring process in which one company split into two separate entities. The primary legislation (other than share transfers, for which there exist special regulations) that will govern demergers in India is prescribed under the Companies Act, 2013 and the Income Tax Act, 1961. By breaking apart, a company can increase its operational efficiency, hone in on its core competencies, and realize their value for greater shareholder gain, as each of the spun-off ventures can focus on its
unique market. It requires approvals from NCLT, shareholders and regulatory bodies like the Securities and Exchange Board of India (SEBI) and, in some cases, the Competition Commission of India (CCI).
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